Softbank Chairman Masayoshi Son is reportedly set to take his case for a Sprint acquisition of T-Mobile US to U.S. regulators next week, according to published reports.
Son, who’s Softbank acquired a controlling stake in beleaguered Sprint last summer for $21.6 billion, is set on March 11 to present his views on the state of the America’s wireless industry in front of the Chamber of Commerce in Washington, D.C. While details of his planned presentation were not known, recent comments from Son would indicate he may present a sour view of the country’s wireless infrastructure.
“Every time I make a business trip to the [United States], I am reminded how terrible connections are there,” he said during a February news conference, according to The Wall Street Journal. Son also reportedly took a dig at current U.S. wireless industry competitiveness, stating: “The [United States] has one of the world’s highest mobile fees,” and the principles of competition aren’t working, he said.
Son and Sprint CEO Dan Hesse met with U.S. regulatory officials earlier this year in an attempt to lay the ground work for a possible Sprint acquisition of T-Mobile US. Such a move would combine the No. 3 and No. 4 domestic operators into a stronger rival against the dominate players Verizon Wireless and AT&T Mobility.
Analysts noted that instead of Sprint approaching the government with plans to consolidate the wireless space, the company may instead note the need for a more robust rival against high-speed broadband providers. Such an angle would bring into play Sprint’s extensive 2.5 GHz spectrum holdings in a move to provide wireless broadband to consumers.
“If Sprint were to create a new home broadband alternative in markets that are unlikely to be served by [fiber-to-the-home], we believe that it could improve its positioning with the [Department of Justice] and [Federal Communications Commission] vis-à-vis its [T-Mobile US] bid at the same time, it could reduce its ultimate [capital expenditures] load and focus its capex on the urban centers where [AT&T] and [Verizon] are spectrum/capacity constrained,” explained Macquarie Capital analyst Kevin Smithen in a research note. “In our opinion, Sprint and SoftBank’s strategy with 2.5 GHz and [TD-LTE] is to focus on the top 100 dense-urban markets using small cells and in-building technology, similar to what SoftBank has deployed in Japan. We believe that Sprint has several potential partners for a non-core market build out, including [Dish Network] and major Internet players.”
Sprint and T-Mobile US have reportedly been in talks regarding a potential partnership, with Son speaking directly with T-Mobile US parent company Deutsche Telekom about acquiring a controlling stake in T-Mobile US. Reports have indicated that Son has also been in discussion with banks on financing options for the deal, however, potential hurdles – including regulatory challenges – seemed to have slowed momentum for a possible deal.
“At present we’re not convinced new leadership at both agencies, Tom Wheeler as chairman of the FCC and William Baer as chief of the DoJ’s antitrust division, necessarily changes the dynamics that a Sprint/T-Mobile merger could give rise to at the moment,” explained Jeffrey Silva, senior policy director for telecommunications, media and technology at Medley Global Advisors, in a recent research note, pointing to recent decisions by the DoJ and FCC to scuttle AT&T’s $39 billion acquisition of T-Mobile USA in 2011 on competitive grounds and spectrum aggregation worries.
“Both Sprint and T-Mobile have improved their positions by degrees through a variety of transactions in recent years, and each will have the opportunity to acquire additional spectrum via upcoming auctions and/or other transactions while keeping the four-carrier national market intact,” Silva added.
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